Basics of VAT Registration in Saudi Arabia

Starting and Operating a Business in Saudi Arabia Makes Good Sens

If you’re a foreign business entrepreneur or investor who’s thinking about setting up a shop in Saudi Arabia, that’s a smart move. Why choose the KSA? Saudi Arabia has the largest free-market economy among Arab states, and the market here isn’t just limited to petroleum industries, either. And the necessary procedures for setting up a company in Saudi Arabia aren’t prohibitive for foreign investors, either. Emerging business opportunities continue to arise in sectors including tourism, hospitality, manufacturing, engineering, real estate, healthcare, financial services, and more. But operating a business here also means you must be familiar with the VAT registration process in Saudi Arabia. What does VAT registration KSA entail? Read on to learn more about this important topic, brought to you by your friends at MSZ Consultancy!

What Is the VAT in Saudi Arabia?

VAT is short for Value Added Tax. Any goods and services bought, sold, or imported to Saudi Arabia are subject to VAT, except for the few which qualify for an exemption. In 2020, Saudi Arabia set its VAT rate at 15%.

Some of the more common goods and services which fall under the normal VAT rate include:

• Food and beverages, including restaurants, fast food, and groceries.
• Local transportation.
• Private healthcare.
• Educational services.
• Health insurance and other types of insurance. One notable exception is life insurance.

There are also certain supplies that are considered zero-rated. For these items, VAT is charged at 0%:

• International transportation of passengers or goods.
• Any services supplied to non-GCC residents.
• Any exports to non-GCC residents, or to areas outside the Council Territory.
• Medications and medical devices spelled out by the Saudi Ministry of Health and the Saudi Food and Drug Authority.
• Any supplies of pure gold, silver, or platinum which are held for investment purposes.

Are All Businesses in Saudi Arabia Required to Register for VAT?

No, they aren’t. There are certain thresholds that have been defined for VAT registration, based on the annual value of products and services provided. Let’s look closer at the three VAT registration classifications in Saudi Arabia:

1. Mandatory VAT Registration:

Businesses that reside in the KSA and have a taxable supply value exceeding SAR 375,000 must register under the Saudi VAT system. This includes valuations exceeding SAR 375,000 over the past 12 months, as well as valuations which are projected to exceed SAR 375,000 over the coming 12 months.

Non-resident businesses that supply goods and services in the state of KSA are also required to register for VAT, regardless of any stated thresholds. Non-residents should appoint a tax representative in Saudi Arabia approved by GAZT to assist with processing your VAT payment due.

2. Voluntary VAT Registration:

Businesses that reside in the KSA and have a taxable supply value between SAR 187,500 and 375,000 can decide to register for VAT voluntarily. Why would a business choose to do so? Registering for VAT in Saudi Arabia provides significant financial benefits, including the deduction of input tax.

3. VAT Registration Exemption:

Businesses that operate in the Kingdom but are exclusively engaged in zero-rated supplies are exempted from mandatory VAT registration. Even so, these businesses may still choose to register voluntarily.

How Does VAT Application in Saudi Arabia Work?

VAT registration in Saudi Arabia isn’t complicated; it’s a simple 5-step process:

1. Register for Your Tax Identification Number (TIN):

You’ll need to obtain a Tax Identification Number (TIN) for your business before you can proceed with VAT registration. You can facilitate this process through the GAZT website portal.

2. Log in to the GAZT Portal

Once you receive your TIN, just log back into the GAZT website to begin the VAT registration process.

3. Choose VAT Registration from the GAZT Dashboard

After logging into the portal, click Register for Value Added Tax (VAT) on the dashboard.

4. Provide the Necessary Documents and Details

In this essential step, you’ll furnish the necessary details about your business, and upload the relevant supporting documents. The key pieces you’ll need to have handy include the financial details of your business, your taxpayer details, and details for your financial representative (only applies to non-KSA residents).

5. Declaration

To finish up your VAT application, you’ll just need to certify that all information you’ve provided is accurate.

How to Verify Your VAT Registration Number KSA?

ZATCA will send a notification once your application is processed, and the VAT certificate will follow. Your certificate will contain your name, Taxpayer Identification Number (TIN), and the effective date of registration. Each certificate also includes a unique VAT certificate number. If you want to check the validity of your VAT registration online, simply use the VAT lookup tool on the E-Services section of the ZATCA website.

MSZ Consultancy Is Here to Help

Got more questions about VAT registration, or about the Saudi VAT rates for 2023? MSZ Consultancy can help to steer you in the right direction. We’re also experts in getting a company setup in Saudi Arabia, and we’d be glad to help! We’re headquartered in Dubai, and we know all about what it takes to get a business successfully launched in either Saudi Arabia or the UAE.

Ready to get the conversation going? Just reach out today, and we’ll be glad to schedule a free consultation! You can call us directly at +971 52 544 1248, There’s no need to wait; we’re standing by to help!